Tax Reductions (Hansard, 15 May 1980)

§ Mr. Meacher

asked the Chancellor of the Exchequer what proportion, in both money and percentage terms, of tax reductions in each, respectively, of the last two Budgets, was received by the 1 per cent. with the highest incomes;

			1979 Budget	1980 Budget
Group	Cost £ million	Percentage Per cent.	Cost £ million	Percentage Per cent.
Top 1 percent.	…	…	740	16.1	120	7.8
Next 9 per cent.	…	…	980	21.2	300	19.5
Next 10 per cent.	…	…	575	12.5	170	11.0
Next 80 per cent.	…	…	2,315	50.2	949	61.7
			4,610	100.0	1,539	100.0

Those persons with the highest incomes suffer the greatest increases in income tax up to each Budget. This is illustrated in the following table where the calculations are for a single person, eligible only for the single person's allowance.

Income Level		Income in 1978–79	Tax in 1978–79	Increase in tax to 1979–80 pre-Budget	Budget reduction in tax 1979–80	Increase in tax to 1980–81 pre-Budget	Budget reduction in tax 1980–81
		£	£	£	£	£	£
1 percent.	…	16,000	6,315	1,832	1,773	1,708	385
10 per cent.	…	8,000	2,255	469	307	500	26
20 per cent.	…	6,500	1,760	360	230	406	26
50 per cent.	…	4,200	1,001	233	149	262	26

In 1978–79 the stated percentage of taxpayers (counting married couples as one) had incomes exceeding the income figures shown. The tax changes for 1979–80 and 1980–81 have been calculated assuming an increase in income of 16.8 per cent. to 1979–80, the increase in average earnings between 1978–79 and 1979–80, and, for illustration only, an increase of 17.8 per cent. between 1979–80 and 1980–81, the percentage by which prices (measured by the retail prices index) increased between the beginning and end of 1979. Of course, as incomes increase in money terms tax is expected to increase in money terms. The percentage changes in tax for the groups above are:

			1979–79 1979–80 post-Budget	1979–80 (post-Budget) to 1980–81 post-Budget
1 per cent.	…	…	0.9	20.7
10 per cent.	…	…	7.2	19.6
20 per cent.	…	…	7.4	20.1
50 per cent.	…	…	8.4	21.8

The following table shows how the estimated tax bill is divided between the various groups.

			1979–80	1980–81
			Pre-Budget Per cent.	Post-Budget Per cent.	Pre-Budget Per cent.	Post-Budget Per cent.
Top 1 per cent.	…	…	12.2	11.2	10.5	10.6
Next 9 per cent.	…	…	22.9	23.2	22.5	22.8
Next 10 per cent.	…	…	14.8	15.3	15.2	15.4
Bottom 80 per cent.	…	…	50.1	50.3	51.8	51.2
Total	…	…	100.0	100.0	100.0	100.0

(The figures are for those in each year who would have paid tax in the year on the allowances of the previous year.)

654W

and, similarly, what proportion, in amount and percentage terms, went, respectively, to the next 9 per cent., the following 10 per cent., and the remaining 80 per cent.